October Corelogic Data

If the rise was purely based on economic fundamentals of rising income and wages that argument holds true,
Initially it might be true but later continued rise in Sydney/melb was mostly due to ever growing easy credit,
An asset price cannot keep growing just based on ever growing credit at some point in time it requires fundamentals to support it
Even with economy at full employment the rise is income/wages is no where close to sustain the rise we already had, look at Sydney's P2I / D2I ratios to see the disparity. Something gotta give, Yield matters, especially now... given that NG/CGT discount are now on chopping board.

Are you suggesting that they that they think a larger drop in the next 12 months is not likely and would be an uncharted territory?

so no policy intervention till then?



May be just may be, RBA is just jawboning rather then actually positioning for policy intervention, The deleverage theatre has so far played as per their script yeah there is a risk their lead player may overact a little and end up changing the final act, but so far so good.

 

The general point is - economic boom with housing crash/results doesn't make sense. Why? Economic conditions provides too much resilience to markets. The RBA believe this & are relying on it to a degree.

Everything else like IO2P&I, taxation policies, elections, etc plays a role in influencing outcomes, but economic conditions are too strong of a support factor helping set floor prices.

This is what the RBA know & are backing on:

- Hundreds of thousands of new Sydneysiders & Melbournites that have come in over the last 3-5 years 'naturalise' and get their PR's. They're young, employed in skilled jobs, high earning & entering an age profile where they're likely to have children/etc. Meanwhile, tourism & education booms play out providing even more temporary residents flowing through. Also, public sector investment is at record highs and the city is being transformed.

- The economy remains very strong, everyone is employed with good jobs and certainty of employment conditions. It's very hard for foreclosures to happen when borrowers are employed and lending conditions weren't ridiculous & institutions are strong without serious microeconomic failures (these loans were originated & verified on 7%+ assessment rates, while rates start with a 3 today). Perth has double the arrears rate of Sydney/Melb despite far better affordability, one reason, people can't find jobs as well.

- Credit remains available to borrowers who can afford it, at a very low price.

- Prices have fallen 10-15% from a historic boom creating more demand naturally due to a lower price.

- Supply levels taper off with the construction supply cycle reacting to 2017/18 price falls.

Now, you have a pretty good 'fundamentals' for demand to rise & you have a strong demand source. You're already seeing this play out, an increasing number of buyers (not investors per se) think now is a good time to buy.

You may be right with your predictions @TheSackedWiggle, you do raise a lot of good points on the negative side of the ledger & there's some really uncertain things happening relating to tax policies that are difficult to quantify. But your predictions are relying on common sense, data, economic history & the RBA to be wrong. Whats happened in November doesn't mean it'll continue for 12 months. If it does happen from this base over the next 12 months though, you will be (another 12-15% from here is disastrous).

 

I think what RBA/ APRA has done in tapering house price rise with macro prudential is quite smart and very targetted.

When I say forced sales I don't mean it in a broad based OO level, I mean it in very narrow based limited segments of high debt to income speculative crowd.
APRA macro prudential intervention has effectively put a cap on speculation yet it didn't punish many of OO and low leverage long term investors with blunt IR rise.

Falls this time is top down and not bottom up, it's selective and not broad based and very targetted towards speculators.

Property may still be australia's holy cow but Speculation being a birth right is now getting challenged.

So irrespective of headlines and sabre rattle from RBA this movie is playing just fine and as per the script.

Let see how this plays out,

By the way,
Based on CL first week of Dec data,
Sydney house price is looking at a fall from peak of 12.3% by end of 2018,
Yet another extrapolation .

 

I think the downward trend will only accelerate as vacancy has reached 13 year height and will continue to go up in the next year or two. Classic example is that Perth is still sliding down although rental vancancy tightens significantly from its peak. There seem bit of lag in price correction with vacancy rates.

 

Sydney House price Dec18 update
Peak CoreLogic Index = 182 (Oct 17)
CL Sydney house price Index = 159.97
(from 163 last month)
Fall from peak = 12.1%
i.e. Sydney houses have so far lost 22% of its total peak gain from 2012

Monthly rate of fall increased to an all time high of 1.66%,
When Dec18 falls are extrapolated yearly ,
Sydney house prices are falling at the rate of 19.97%..

CoreLogic Home Property Value Index Monthly Indices - Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin, Canberra & Hobart

 

Sydney/Melbourne SA3 regions fall so far (quite a few double digit fall suburbs)

















Cameron Kusher (@cmkusher) | Twitter

 

That downward slope is that increasing - it’s not going to flatten out for a while so a lot more falls to come.

 

Has anyone kept a copy of the monthly summary by CoreLogic Daily Dwelling Index (All Dwellings, Houses and Units) like that below going back to when it was introduced?

 

House price Jan 19 update
Peak CoreLogic Index = 182 (Oct 17)
CL Sydney house price Index = 157.69
(from 159.97 last month)
Fall from peak = 13.36%
i.e. Sydney houses have so far lost 24.3% of its total peak gain from 2012


CoreLogic Home Property Value Index Monthly Indices - Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin, Canberra & Hobart

 

Troll!!!

I kid. Melbourne down 1.7% for the month, oof.

 

Sydney House price Feb19
Peak CoreLogic Index = 182 (Oct 17)
CL Sydney house price Index = 156.01
Fall from peak = 14.3%
i.e. Sydney houses have so far lost 31.7% of its total peak gain from 2012

 

So looks like syd will hit 15% next month. I'd not be surprised if RBA steps in not long after, they did seem to be verbally positioning in their last minutes update. I believe Phil Lowe said something to the effect of "if it goes down much more it will effect the wider economy".... which since the RBA says they don't adjust policy based on house prices, sounds like positioning for a cut based on the effects on the economy.

All speculation on my part, but I like shane oliver's take, two cuts this year. One mid, one at the end.

 

2019 would be very interesting if borrowing capacity is not loosened in a hurry.

Inspite of heavy risk getting trolled by sir #HowOldRU
I strongly believe IO2PI rollover risk still remains strong this year and next (230+ bn IO loan due to expire in next two years) (no disrespect to @Redom s position)

much of the other headwinds will become more prominent this year like
OTC settlement issues, FONGO, construction slowdown risk, etc

with the impact of potential NG/CGT changes still unknown.